Morning Note: Abnormal Reaction — And — Man’s Search for Meaning

Just in the course of my morning routine of perusing overnight and early morning data and developments, the Dow went from up mid-double digits (surrendering a 300+ rally in futures trading last night) to down 220 points to up 155 as I type. I would tell you to buckle up, but you’re not trading this noise, right? Say “right.”

Asian equities traded mostly lower overnight, with 12 of the 16 markets we track closing in the red. Europe’s action this morning has been much like the U.S.’s; as I type 12 of the 19 bourses we follow are in the green. U.S. major averages, save for the Russell are green as well: Dow (dipped since I wrote paragraph 1) up 55 points  (0.21%), S&P 500 up 0.68%, Nasdaq up 1.07%, Russell 2000 down -0.15%.

The VIX (SP500 implied volatility) is down a big -7.42% (it’s been all over the place this morning as well), but at an extremely dangerous 37.28. VXN (Nasdaq vol) is down -6.45%.

Commodities are feeling a bit of pain from another big rally in the dollar this morning: Oil futures are off -3.89% (a spike in inventories is a headwind there as well), gold’s down -0.19%, silver’s down -0.05%, copper futures are actually up 0.22% and the ag complex is down -0.55%.

The 10-year treasury is being bid lower (yield higher) and the dollar is up a big 0.54%. Lack of action in today’s European Central Bank meeting along with renewed covid lockdowns across the continent is (Euro lower) notably aiding the dollar this morning.

Our core portfolio, with 23% targeted to commodities, is literally flat, +0.01% as I type. Materials (stocks), tech, banks, industrials and energy (ironically) being the winners. Healthcare, ag commodities, consumer staples, utilities and gold the losers.

Economist Dave Rosenberg in a piece he published yesterday referenced a book that I had read probably 20 years ago. Over the years, mostly to the kids, I’ve made reference to the inspirational story of holocaust survivor Victor Frankl. Reading Dave yesterday inspired me to read Man’s Search for Meaning again. I couldn’t put it down last night.

While, doing what I do, I find investing metaphors virtually everywhere I look, as I did last night while reading Frankl’s story, this book is so much more than a quote-source for an eager blogger. It literally shakes the reader to his/her core. 

Think investing as you read this quote:

“An abnormal reaction to an abnormal situation is normal behavior.”

That can explain the euphoria embedded in current stock prices amid these abnormal conditions. It can also explain the necessary change in strategy the thoughtful investor/portfolio manager must pursue in light of these abnormal conditions.

And, if I may, here’s something far more meaningful from the book to think on:

“Again and again I therefore admonish my students both in Europe and in America: “Don’t aim at success—the more you aim at it and make it a target, the more you are going to miss it. For success, like happiness, cannot be pursued; it must ensue, and it only does so as the unintended side-effect of one’s dedication to a cause greater than oneself or as the by-product of one’s surrender to a person other than oneself.”

Have a great day!


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